Posts tagged with: energy

As citizens await state decisions on new state EPA “fracking” regulations, many are worried radical environmentalist may compromise a promising opportunity in the development of gas reserves.

Natural gas advocates say radical environmentalists have long demonized the oil industry in their fight against free enterprise. Environmental groups claim fracking techniques to extract natural gas threatens the cleanliness of ground water, but their attacks contradict EPA studies that report there are no proven cases where fracking has contaminated water.

Extreme environmental groups have teamed up with some in the media to push their anti-growth agenda. A Heritage Foundation blog reports,

Though more EPA fracking studies are currently underway, environmentalist accusations contradict solid facts and studies. With almost any human activity, there will be some sort of environmental effect, but the benefits of shale drilling blows the costs out of the water. According to experts, a typical Marcellus Shale well can generate up to $4 million in economic benefits while only creating $14,000 in environmental damage.

If given the chance, the Independent Petroleum Association of America suggests the oil industry has the potential to lift our economy back on its feet again:

Petroleum powers the economy of this nation overall, evidenced by [a] strong correlation between states that have high petroleum use and high output. Petroleum is integral in our daily lives, not just as a fuel, but because it is present in common objects that are crucial to living a high-quality life.

But radical environmental groups often stand in the way. Some of these groups insist on “biological egalitarianism” in which all life forms are considered equal. An Acton publication titled A Biblical Perspective on Environmental Stewardship explains the dangerous connotation of this faulty environmental philosophy:

Instead, this philosophy negates the biblical affirmation of the human person’s unique role as steward and eliminates the very rationale for human care for creation. The quest for the humane treatment of beasts by lowering people to the level of animals leads only to the beastly treatment of humans.

Extreme environmental groups should remember the oil industry is not evil.They fail to see that their radical ideology is hurting the nation’s poor. Increasing oil production can fuel economic growth and provide jobs for the unemployed. To attack the oil industry in such a way is indirectly attacking human development. Cited in Ray Nothstine’s commentary on high gas prices and its impact on the poor are these words from John Paul II,

Besides the earth, man’s principle resource is man himself. His intelligence enables him to discover the earth’s productive potential and the many different ways in which human needs can be satisfied.

Of course, any human action has some effect on the environment; and so we have the responsibility to exercise environmental stewardship rather than prioritizing the fish in the Chesapeake Bay over the welfare of the human person.

Political news changes quickly, and now reports are coming out of Washington DC that Senator Dianne Feinstein, who has been leading the way in killing the ethanol subsidy and tariff, has struck a deal with Senators Amy Klobuchar and John Thune, two stalwarts for protecting ethanol. While the rumored deal does not indicate the repeal of the blending mandate it is a step in the right direction.

However, while we wait on Congress and the President for action, the Brazilian ethanol industry is eying the U.S. ethanol market. Repealing the tariff will allow Brazil to expand its ethanol industry. Many questions need to be answered before ethanol is imported into the U.S. from Brazil.

In a previous post I posed concerns about whether ethanol can meet both U.S. and Brazilian demands. Furthermore, what are the environmental consequences of ethanol? Reports are showing deforestation in the rainforest. Finally, what will happen to food prices?

It is unfortunate that there are even more questions that need to be answered.

Like the corn based ethanol in the U.S., Brazil’s sugar based ethanol is a false market created by the government. Brazil doesn’t subsidize ethanol; instead it resorts to high taxes. Brazilian gasoline taxes are at 53 percent while the tax placed on ethanol is much lower making ethanol cheaper than gasoline. The question is how long can an industry last and actually be sustainable when it is propped up by the government and is a false market?

It is also important to note that the Brazilian ethanol industry needs a large sum of new investment, about $80 billion worth in the next ten years, to meet global demand. In an industry that is heavily dependent on the government one must wonder, who will pay for these new investments?

Another potential hazard of relying on ethanol is crop shortages. Such crop shortages may occur for a variety of reasons, one of which is out of our control: the weather. What happens when fuel relies on crops, and there is actually a shortage in the harvest? How much of the crop goes to fuel and how much goes to the food supply? Both are important. Food nourishes, however, fuel gets people to their jobs where they earn a salary which they use to purchase food. Brazil may be forced to answer these questions this year as sugarcane production is currently down 25 percent as compared to last year. The lack of production is due to bad weather and aging plants.

However, because of the lack of production sugar prices are on the rise as they saw a 14 percent surge in June. While some are sounding the alarm, other analysts are remaining calm, such as Eli Mamoun Amrouk of the United Nations’ Food and Agriculture Organization:

El Mamoun Amrouk, sugar analyst at the Rome-based FAO, said: “It’s difficult to predict exactly what’s going to happen to the sugar price because the market’s so volatile and so any new information can have a big effect on price. The speculation is still there, exacerbating the trend and changes in the dollar also play a part.

“But the signs are that production is growing significantly and, especially in India and Thailand, the prospects are very positive, so we should see the price start coming down in the summer,” he said.

Whether sugar prices do come down or not, we still face a critical question. If we continue to pursue an energy plan based on biofuels, what happens when we do face a shortage in crop production? The world will be faced with not just rising food prices but also with rising fuel prices. How do people in developed countries, who already have a difficult time affording food, feed themselves when the food supply is actually going into the fuel supply?

The future of corn ethanol is up in the air, and while the Senate gave signs of repealing both the subsidy and the tariff on imported ethanol, the bill the repeal was attached to failed and Congress is back to square one in the ethanol debate. The uncertain future of corn ethanol has brought forth discussion on the possibility of importing sugar cane based ethanol from Brazil.

Before the U.S. begins importing ethanol from Brazil, a broad cost benefit analysis needs to be taken by the government to decide if it is actually a smart decision to begin importing and using sugar cane based ethanol from Brazil.

A concern of many critics of alternative fuels is whether or not alternative fuels can meet demand. According to the Energy Tribune, corn ethanol cannot meet U.S. demand whereas even the country turned all of its corn into ethanol only 6 percent of its total annual oil needs would be met.

This leaves ethanol supporters looking for another energy source to help close the gap. They may be looking no further than the sugar cane based ethanol produced in Brazil. However, even importing Brazilian ethanol will leave the U.S. looking for another energy resource.

In 2010 the U.S. consumed 138.6 billion gallons of gasoline and Brazil currently produces about 7.4 billion gallons of sugar cane based biofuels. Importing sugar cane based ethanol from Brazil while still consuming corn ethanol does not even get the U.S. close to meeting its energy demands especially when 75 percent of Brazil’s ethanol output is sold within its borders, and it experienced a shortage earlier this year.

And the simplistic answer to this problem, planting more sugar cane, may not be the best solution. The Brazilian government has been surprised by the deforestation of the Amazon rainforest. According to Brazil’s space research institute, deforestation of the Amazon rainforest increased from 103 sq km in March and April 2010 to 593 sq km during the same period this year. This surprised the Brazilian government which reported that deforestation had fallen to its lowest rate in 22 years when actually there was a 27 percent jump in deforestation from August 2010 to April 2011. The biggest rise in deforestation was in Mato Grosso, a state in Brazil, which produces more than a quarter of Brazil’s soybean harvest. However, what does that have to do with sugar cane causing deforestation?

A 2010 article by Foreign Policy explains how sugar cane based ethanol fosters “agricultural displacement” resulting in the deforestation of the rainforest:

Public officials declare that ethanol will not lead to deforestation in the Amazon or exacerbate climate change. They say that the particular soils and rainy weather characteristic of the rainforest are not suitable for the growth of sugar cane. Agriculture minister Reinhold Stephanes has been quoted as saying that “Cane does not exist in Amazonia.” In a withering blow to Stephanes’s credibility, however, authorities recently raided a sugar cane plantation in the state of Pará where 1,000 workers were laboring under appalling debt slavery conditions. In all, environmentalists claim, hundreds of thousands of acres of sugar cane have been planted in the Amazon.

Even if there are only a few cane plantations operating in the Amazon, ethanol may exert an indirect impact on the rainforest through a phenomenon known as “agricultural displacement.” Though the state of São Paulo is located far from the Amazon rainforest, the sugar cane there can drive other crops toward the agricultural frontier. In the state of São Paulo, sugar cane has been planted on former pastureland and this has pushed cattle into Mato Grosso. Hundreds of thousands of cattle are moving into the Amazon every year as a result of displacement by ethanol in the state of São Paulo alone, say environmentalists. This migration is becoming all the more likely since one can purchase 800 hectares of land in the Amazon for the price of just one hectare in São Paulo. Additionally, some soy plantations in the center of the country have been turned over to ethanol production, prompting concern among environmentalists that this will lead soy producers to move into the Amazon. And local observers say that sugar cane plantations are already pushing soy farmers and ranchers into the rainforest.

The same article by Foreign Policy states that sugar cane crops have also led to the deforestation in the Atlantic rainforest.

There are still many unintended consequences and factors the United States needs to take into account before importing sugar cane based ethanol. CNNMoney published an article stating that, “Some experts say the Brazilian formula gets even less gas mileage than its corn ethanol counterpart, which itself gets lower mileage generally than gasoline.” Furthermore, biofuels will have an adverse effect on food prices. According to the Organization for Economic Cooperation and Development, which is the UN’s Food and Agriculture Organization, biofuels will absorb 13 percent of global coarse grain production, 15 percent of vegetable oil, and some 30 percent of sugar by 2020. Again, what is more important, food or fuel? How are the poor and vulnerable expected to purchase food when it is being shipped to prosperous countries for fuel?

Just like corn based ethanol, sugar cane based ethanol also has its consequences. Experts continue to debate whether sugar cane based ethanol is a viable option. However, before jumping on the bandwagon, policy makers need to take a pragmatic approach when discussing the energy future of the U.S.

Gas prices are beginning to come down, but for many people prices are not falling fast enough.

The pain caused by high gas prices is spread widely, but it is felt intensely on the working poor and the unemployed who are trying to find a job.

A recent story in the Chicago Tribune highlights Alicia Madison, a resident of the Chicago suburbs who is unemployed. Madison is looking for a job, but because of high gas prices she, at times, cannot even afford to go to an interview:

Before a recent job interview, Alicia Madison climbed into her 2001 Ford Explorer and realized her gas tank was empty, just like her bank account.

Unable to afford gas for the 25-mile round trip from her Glen Ellyn home to the Naperville business, Madison was forced to reschedule. She now relies on gas vouchers issued by a nonprofit agency to drive to interviews.

Madison, a certified nursing assistant unemployed three months, is desperate to return to work, but not desperate enough to take a job too far from home with gas prices at record highs.

“I have to be conscious of where I’m looking and how far it’s going to be,” said Madison, 23, a single mother on food stamps. “I don’t want to work just to pay for gas.”

Her dilemma underscores the problem that steep gas prices have created for the unemployed: They need income to fill their tank but can’t afford to take jobs with long commutes.

Some job seekers say they are more selective now, curtailing face-to-face networking and ignoring some opportunities based on the high transportation costs.

As the article also points out, job seekers have to decide if the pay for a potential job is enough for them to make the daily commute. Is it worth working eight or nine hours a day when a good chunk of the earnings goes toward paying for the gas needed to get to work?

The hardships for low income workers are further explained by Greg McBride, Senior Financial Analyst at Bankrate.com. According to McBride, 72 percent of Americans who make less than $50,000 are cutting their discretionary spending. While cutting discretionary spending is what is needed to be a good financial steward when money is tight, McBride explains that higher gas prices hurt economic growth because they cause a decrease in consumer spending.

As Ray Nothstine argues in “High Gas Prices Devastating to Poor”, we should do everything we can to lighten the burden on the poor and lower gas prices. This will aid everyone, but especially those who are the most adversely affected by the high gas prices. One way to lower gas prices is to look no further than the free market, which is articulated again by Nothstine:

While we are bound to labor, 17th century Bible commentator and Presbyterian minister Matthew Henry reminds us, “Let not us, by inordinate care and labor, make our punishment heavier than God has made it; but rather study to lighten our burden.”

Similarly, John Paul II declared, “Besides the earth, man’s principal resource is man himself. His intelligence enables him to discover the earth’s productive potential and the many different ways in which human needs can be satisfied.”

This is good advice. The free market helps to sort out those effective alternatives, encouraging us to drill for oil responsibly at home, and protecting us from costly utopian schemes that drive up energy prices. The market is also our best hope for developing renewable energy technologies that are economically feasible.

Incandescent light bulbs are months away from being banned because they do not meet the efficiency requirements passed by Congress in 2007 that take effect starting 2012; however, before the ban takes place there may be a need to further evaluate the safety and benefits of CFL light bulbs.

New research has some concerned that CFL bulbs contain cancer causing chemicals:

…German scientists claimed that several carcinogenic chemicals and toxins were released when the environmentally-friendly compact fluorescent lamps (CFLs) were switched on, including phenol, naphthalene and styrene.

Andreas Kirchner, of the Federation of German Engineers, said: “Electrical smog develops around these lamps.

“I, therefore, use them only very economically. They should not be used in unventilated areas and definitely not in the proximity of the head.”

Furthermore, the Migraine Action Association has also warned that CFL bulbs could trigger headaches. This was revealed in a report by The Telegraph, a UK paper, and many British experts are insisting that more research needs to be conducted and are recommending that consumers do not panic.

Despite possible medical problems, can we rest assured that the ban of incandescent light bulbs is because the government is concerned about our pocketbooks and wants us to save money on our energy bills, even though the CFL bulbs are more expensive than their incandescent counterparts? Furthermore we are reminded that CFL bulbs last longer. So the government is truly looking out for us right?

Wrong.

As the Wall Street Journal points out, the estimated useful lifespan for a CFL bulb was originally 9.4 years, but now CFL manufacturer PG&E estimates it to be 6.3 years. In some locations, such as bathrooms, the bulbs don’t even last that long. “Field tests show higher burnout rates in certain locations, such as bathrooms and in recessed lighting. Turning them on and off a lot also appears to impair longevity.” As the Heritage Foundation accurately states, “This does not mean that CFLs won’t save consumers energy in the long run. But be wary of government bureaucrats telling you that you’ll save X dollars or save X amount of energy by buying a more efficient washing machine, air conditioner, vehicle, and other machine with energy-efficiency standards.”

And what happens if you unfortunately break a CFL bulb? The Heritage Foundation shows a pretty long list of safety guidelines to follow from the EPA due to the mercury content found in the bulbs. Also, keep in mind that even if you do not break a CFL bulb it still has to be properly disposed, meaning you cannot simply throw it away.

There may be a way to avoid the potentially harmful CFL bulb in 2012. An LED bulb may be on the market that can replace the 100 watt incandescent bulb and it will only cost you about $50 per bulb. Quite the bargain.

British experts may have had a point by urging that more research be conducted. The U.S. government should heed this advice, especially with studies coming out discrediting the CFL bulbs before the ban on incandescent light bulbs takes effect (never mind the fact that the government shouldn’t have banned incandescent bulbs, and instead, should let the market dictate whether consumers decide what light bulb they would like to purchase). Until the government decides to act on this measure I would like to know where I can get in line for my CFL light bulb waiver. Hey, it seems to be working for many constituents in Nancy Pelosi’s district in acquiring ObamaCare waivers.

Everywhere we look we are facing rising prices. We find them at the gas pumps and now we see them at our supermarkets. Food prices are climbing, and just like gas prices, they are having broadly felt adverse effects on Americans.

The Wall Street Journal sat down with C. Larry Pope, the CEO of Smithfield Foods Inc., the world’s largest pork processor and hog producer by volume, to discuss the rising food prices and how they are affecting his business. Pope attributes the increase in food prices to corn prices and the ethanol industry:

It’s also a business under enormous strain. Some “60 to 70% of the cost of raising a hog is tied up in the grains,” Mr. Pope explains. “The major ingredient is corn, and the secondary ingredient is soybean meal.” Over the last several years, “the cost of corn has gone from a base of $2.40 a bushel to today at $7.40 a bushel, nearly triple what it was just a few years ago.” Which means every product that uses corn has risen, too—including everything from “cereal to soft drinks” and more.

It is also important to note that, while Pope does not go into great detail, he points to the depreciating dollar as playing a role in inflated food prices.

Pope says the majority of his customers will be hurt by rising food prices:

“Maybe to someone in the upper incomes it doesn’t matter what the price of a pound of bacon is, or what the price of a ham, or the price of a pound of pork chops is,” he says. “But for many of the customers we sell to, it really does matter.” Workers can share cars when the price of oil rises, he quips, but “you can’t share your food.”

As food prices rise, what are most people expected to do? Many are on a limited budget and where will they cut back? Increasing food prices may also result in people turning to cheaper less nutritious food. Lora Iannotti, public health expert and professor at Washington University in St. Louis, explains how rising food prices lead to nutritional problems for everyone—especially the most vulnerable:

“During a food price crisis, households moved away from ‘luxury’ food items such as meat, fish and dairy products to poorer quality food,” she says.

Data from nationally representative household budget surveys show that during a food crisis, calorie intake is reduced by an average eight percent from pre-crisis levels, equally affecting rural and urban areas.

“We are particularly concerned for families with young children,” Iannotti says. “When you have a reduction in calories and critical nutrients for kids under 2, there are long term consequences such as stunted growth, cognitive deficits, lower educational attainment, and reduced future productivity.”

Like many other critics of the ethanol subsidy, Pope calls for an end to these subsidies. That would be a significant aid to reigning in the high food prices:

…Mr. Pope says, get rid of the ethanol subsidies and the tariff. “I am in competition with the government and the oil industry,” he says. “It’s not fair.” Smithfield’s economists estimate corn prices would fall by a dollar a bushel if ethanol blending wasn’t subsidized. “Even the announcement that it is going away would see the price of corn go down, which would translate very quickly into reduced meat prices in the meat case,” he says. Imagine what would happen if the mandate and tariff were eliminated, too.

Gary Wolfram, economics and public policy professor at Hillsdale College, offers a similar message. Wolfram points to the sharp increase in food prices, the inefficiency of corn ethanol, and calls for the end of ethanol subsidies:

World food prices are on the rise. In the United States, retail food prices rose .6 percent in February and are up 2.3 percent from February of 2010, the highest 12-month increase since May 2009. Part of the reason for the revolutionary fervor in the Middle East is rising food prices. Yet our government provides a $6 billion per year subsidy to turn the U.S. corn crop into gasoline. Ever gallon of ethanol refined into gasoline receives a 45-cent per gallon subsidy.

[…]

But this inefficient use of corn does more than just cost taxpayers’ money. It is part of the problem of increasing food prices. Ethanol makes up about 8 percent of U.S. fuel for vehicles, but uses up about 40 percent of the nation’s corn crop. The Economist estimates that if all the American corn crop that goes into ethanol were used as food, global corn food supplies would increase by 14 percent.

And as an article in Investors.com argues, ethanol has failed to achieve many of the goals that its proponents claim it would achieve.

Acton’s criticism of the ethanol subsidy is not new. In 2008, Ray Nothstine was interviewed and articulated the moral problems with the ethanol subsidy, the unintended consequences, and inefficiencies of ethanol that are now coming to light. Readers can listen to the interview here.

Rising food and gasoline prices are causing people to bear economic hardships, and, with limited household budgets, these trends cannot continue. Many leaders and economists are correct in calling for a reevaluation of our ethanol policy.

The blame game in Washington is heating up on skyrocketing gas prices. Republicans are criticized as being in the back pocket of the oil industry and partaking in crony capitalism. The Democrat Congressional Campaign Committee is even cashing in by hosting a fundraiser that is based on what has been the House Republicans “decade long relationship of protecting Big Oil taxpayer giveaways, speculations and price gouging…” However blame is also placed on Democrats, with accusations of placing barriers to prohibit domestic drilling. The debate has also centered around how we can be better environmental stewards. We may find ourselves asking questions such as whether green energy promotes environmental stewardship, and if oil drilling results in a dramatic harm to the environment?

An article published by the Washington Examiner contains disturbing numbers that will not be received very positively. Oil production in the Gulf was lower than predicated by the Energy Information Administration (EIA); however, imports were up:

While oil production in the Gulf is down more than 10% from April 2010 estimates, net crude oil imports are up 5%. At $83 dollars a barrel (the approximate average price of oil in the fourth quarter of 2010) that means Obama’s oil drilling permatorium increased American dependence on foreign oil by about $1.8 billion dollars in the fourth quarter of last year alone. The numbers only get worse as Obama’s permitorium further cuts into production. A Wood Mackenzie study predicts that for all of 2011 the permitorium will result in the loss this year of about 375,000 barrels of oil a day.

More imported oil also means higher prices at the pumps. The EIA explains: “Retail gasoline prices tend to be higher the farther it is sold from the source of supply.” It costs more money to transport oil to your gas station from the Persian Gulf than from the Gulf of Mexico.

On April 26th, President Obama wrote a letter to Congress calling for “immediate action to eliminate unwarranted tax breaks for the oil and gas industry, and to use those dollars to invest in clean energy to reduce our dependence on foreign oil.” The tax breaks President Obama is asking to be removed are worth $4 billion per year. This isn’t the president’s first call to action. His 2012 budget proposal also calls for the removal of the “subsidies.” But some have pointed out that the oil industry does not receive direct subsidy payments in the way that some farmers do. The president’s proposal specifically states:

Eliminates Inefficient Fossil Fuel Sub­sidies. Consistent with the Administration’s Government-wide effort to identify areas for sav­ings, the Budget eliminates inefficient fossil fuel subsidies that impede investment in clean energy sources and undermine efforts to address the threat of climate change. Approximately $4 bil­lion per year in tax subsidies to oil, gas, and other fossil fuel producers are proposed for repeal.

Here at the Acton Institute we have spoken in opposition to true subsidies, such as subsidized farming (articles can be found here, here, and here) and health care policy (a related article can be found here). In the past we have articulate the problems with subsidization. The language in President Obama’s budget proposal appears to be vague and does not specify where the oil industry will no longer be, in his words, subsidized. Is it in drilling? Does it affect gas prices? Ray Nothstine notes in his commentary, “High Gas Prices are Devastating to Poor” our moral obligation to the vulnerable and how the high gas prices are affecting them. With gas prices continuing to climb precautions should be taken to prevent even higher prices.

Brian Johnson, the American Petroleum Institute’s senior tax policy advisor, provides insight on the proposal in the president’s 2012 budget. Johnson explains that the president is proposing to remove the intangible drilling cost provision, which is the oil industry’s ability to deduct drilling “costs associated with labor, architecture, design and engineering; basically the building of an oil rig, a platform or any structure that allows the industry to get into the ground and find oil or natural gas.” Johnson claims this process helps in planning for the next stage of development and construction. Furthermore, Johnson claims the oil industry is already paying its fair share in taxes with an income tax rate at 48 percent. Whereas other S&P Industrials average a 24 percent effective tax rate. Stephen Comstock, also from API, responded to President Obama’s State of the Union Address in January, articulating problems with the president’s call to end subsidies for the oil industry.

While the call to end the oil subsidies is being criticized by some, others are supporting such an action. Bill Becker, a Senior Associate with Third Generation Environmentalism and an energy and climate specialist at Natural Capitalism Solutions, argues the subsidies place the United States at a competitive disadvantage to China and India in the competition to champion alternative energy:

If we are looking for ways to chip away at the budget deficit, to keep America competitive and to use market-based mechanisms to build a competitive clean energy economy, then subsidy reform should be near the top of the list.

Think of it this way: Imagine an Olympic marathon in which the U.S. team has to run on a steep and continuous uphill slope, while the teams from China and India run on a level track. That’s what “winning the future” will be like for the United States if we keep our perverse energy policies. Direct and indirect taxpayer support for fossil energy, which far exceeds government support for emerging green energy technologies, almost certainly makes winning the future a futile race.

Becker also cites a report by the Government Accountability Office that claims “taxpayers are losing tens of billions of dollars in royalty payments in part because the Department of Interior doesn’t have sufficient capacity to monitor oil and gas production on public lands.”

In his letter address to Congress, the president calls to reinvest the $4 billion per year that the oil companies receive in subsidies into clean energy. The problem with current alternative energies is they are inefficient, not cost effective, and cause many unintended consequences (related articles on the inefficiency and unintended consequences of various alternative energies can be found here, here, here, and here).

Yes, we will need to develop good alternatives to oil over the long haul, but spending money on energy sources that are not effective is not a wise investment or a sign of being good financial stewards. If the tax provision and subsidies for the oil companies are to be cut, and taking into account the budget crisis the United States is currently facing, it may better serve the country to not reinvest the money and cut it out of the budget completely.

Now meeting the goal of cutting our dependence depends largely on two things: first, finding and producing more oil at home; second, reducing our overall dependence on oil with cleaner alternative fuels and greater efficiency. This begins by continuing to increase America’s oil supply.

These were the words spoken by President Obama on March 30 in an address he gave at Georgetown University on America’s energy security. The president also stated in the same speech that “one big area of concern has been the cost and security of our energy,” and “ … our best opportunities to enhance our energy security can be found in our own backyard … ”

Today, Fox News reports that the Environmental Protection Agency (EPA) is forcing the Shell Oil Company to scrap its efforts to drill for oil in the Arctic Ocean, off the northern coast of Alaska. The move by the EPA is based on the decision that the arctic drilling will be hazardous to those who reside in a small village located 70 miles away from the proposed off-shore drill site.

The EPA’s appeals board ruled that Shell had not taken into consideration emissions from an ice-breaking vessel when calculating overall greenhouse gas emissions from the project. Environmental groups were thrilled by the ruling.

The stakes associated with Shell’s proposed drilling site are high: an estimated 27 billion barrels of oil. Furthermore, oil production on the North Slope of Alaska is currently so low that any more decrease in production will result in the shutdown of the pipeline. Is that how we reduce dependence on foreign oil?

The problem is the Obama Administration is not walking in step with the president’s most recent speech. Today they scrapped what may have become an important step to increasing more oil produced in America. President Obama stated in his speech, “…producing more oil in America can help lower oil prices, can help create jobs, and can enhance our energy security…”

In the same speech he said:

Right now the [oil] industry holds tens of millions of acres of leases where they’re not producing a single drop. They’re just sitting on supplies of American energy that are ready to be tapped. That’s why part of our plan is to provide new and better incentives to promote rapid, responsible development of these resources.

Again, it doesn’t look like the Obama Administration is following through with its message.

Among other problems, we can see that this latest action by the Obama Administration will do nothing to slow the rapid rise in the price of gasoline. In a recent commentary, Ray Nothstine articulates many of the problems Americans are seeing by the rising gas prices:

Many individuals and families are already curtailing discretionary spending to save for gas. In turn, more money and jobs exit the U.S. economy for oil exporting countries.

[…]

Some lawmakers from both parties in oil producing states are asking for more domestic drilling, more refineries, and uniform state standards on gasoline mixture requirements. All of these proposals will help lower prices and could add hundreds of thousands of American jobs.

President Obama has responded by saying an increase in domestic drilling “will help some.” He also signaled he may be willing to tap more of the Canadian oil sands, but at the same time, he wants to cut oil imports by one-third.

High prices at the pump can offer a moment to pause too and remember a spiritual truth. The price of gas not only draws attention to the Middle East, but it draws our attention back to the Garden of Eden that tradition places in that oil-rich region.

Oil itself is decayed vegetation and plankton that has seeped into the ground, forming over millions of years. At one time wildlife was abundant and forests were especially lush in the garden. In the creation story we are reminded that after the fall of man, we have to toil for resources (Genesis 3:19).

While we are bound to labor, 17th century Bible commentator and Presbyterian minister Matthew Henry reminds us, “Let not us, by inordinate care and labor, make our punishment heavier than God has made it; but rather study to lighten our burden.”

President Obama’s speech, delivered on March 30, 2011, can be read here.

My commentary this week focuses on the how the rise in prices at the pump is impacting the poor. Currently, in many areas of the country a gallon of gas is now priced over $4. I also argue that we need a more coherent energy policy coming from leaders in Washington. Part of the argument against drilling in ANWR (Arctic Refuge) over a decade ago was that the oil wouldn’t hit the market for 10 years. That’s a very shortsighted way of thinking about meeting our energy needs. We need leaders in Washington to work for us not against us.

Perhaps now a forgotten event, former Senator Jesse Helms in 1982 waged a dramatic battle against a federal gasoline tax hike of five cents. The tax hike had bipartisan support, including the support of President Ronald Reagan. However, Helms fought virtually alone with only a small cadre of tax opponents. He eventually lost on the measure but as he was traveling back to North Carolina he stopped at a rural Hardees restaurant. Truckers recognized Helms and he was greeted with thunderous applause for his efforts. Helms stood up not just for business interests like the trucking industry, but the rural poor, who are hit hardest by increases in gas prices. The current federal tax on a gallon of unleaded gasoline is 18.4 cents per gallon and the mean state tax on a gallon is 26.6 cents. My commentary is printed below:

High Gas Prices Devastating to Poor

by Ray Nothstine

Religious leaders staging a fast over budget cuts on social spending have not offered to fast over higher gas prices, even though the impact on the poor is devastating. In fact, there is very little focus on the rise in energy costs, with political and religious leaders remaining largely silent. Yet, when they speak on the issue, they often do not have your best interests in mind.

At a recent visit to a wind turbine plant, President Obama responded to one questioner’s concern about rising prices by laughing and saying, “If you’re complaining about the price of gas and you’re only getting 8 miles per gallon, you might want to think about a trade-in.” The president didn’t say which vehicle he was talking about. But a 2003 Hummer H2, rated among the worst for gas mileage, scores 10-14 miles per gallon.

But for most people a truck that is getting 8 miles per gallon is the one that delivers their food. This is true too for charitable food banks as delivery costs cut into the number of people they can feed. Food banks also depend on volunteer drivers to deliver meals to shut-ins.

Many individuals and families are already curtailing discretionary spending to save for gas. In turn, more money and jobs exit the U.S. economy for oil exporting countries.

The national average for a gallon of gas is currently $3.79. Some American cities are well over $4 per gallon. The price, up almost a $1 since last year at this time, has some experts forecasting $5 for Memorial Day.

While oil markets can be complex, free market alternatives offer better relief than heavily subsidized “green energies” propped up by government. A new study in the United Kingdom by Stuart Young Consulting and the John Muir Trust again pointed out what previous studies have found: Wind output is often less than anticipated and is an unreliable source of energy.

Likewise, electric cars are rejected by consumers shopping for fuel economy—even though they are subsidized with tax credits. Rachel Slobodien of the Heritage Foundation points out that people are instead buying more affordable super fuel economy cars with traditional engines that get upwards of 50 miles per gallon.

Some lawmakers from both parties in oil producing states are asking for more domestic drilling, more refineries, and uniform state standards on gasoline mixture requirements. All of these proposals will help lower prices and could add hundreds of thousands of American jobs.

President Obama has responded by saying an increase in domestic drilling “will help some.” He also signaled he may be willing to tap more of the Canadian oil sands, but at the same time, he wants to cut oil imports by one-third.

High prices at the pump can offer a moment to pause too and remember a spiritual truth. The price of gas not only draws attention to the Middle East, but it draws our attention back to the Garden of Eden that tradition places in that oil-rich region.

Oil itself is decayed vegetation and plankton that has seeped into the ground, forming over millions of years. At one time wildlife was abundant and forests were especially lush in the garden. In the creation story we are reminded that after the fall of man, we have to toil for resources (Genesis 3:19).

While we are bound to labor, 17th century Bible commentator and Presbyterian minister Matthew Henry reminds us, “Let not us, by inordinate care and labor, make our punishment heavier than God has made it; but rather study to lighten our burden.”

Similarly, John Paul II declared, “Besides the earth, man’s principal resource is man himself. His intelligence enables him to discover the earth’s productive potential and the many different ways in which human needs can be satisfied.”

This is good advice. The free market helps to sort out those effective alternatives, encouraging us to drill for oil responsibly at home, and protecting us from costly utopian schemes that drive up energy prices. The market is also our best hope for developing renewable energy technologies that are economically feasible.

We know too well that leaders in Washington reflect the fall of man, but they are not working to lighten our burden right now. As the price of gas approaches $5 per gallon, perhaps its rise may help us to refocus on new ways to meet the needs of those who have the most to lose from rising fuel costs.

Last week President Obama gave an address outlining his new energy policy. In light of the tragic events in Japan, the speech was much anticipated especially considering the president’s prior commitment to nuclear energy.

As expected President Obama continued advocating for a greener energy policy while continuing to push for the country’s independence from oil. However, the President’s speech, an article by Reuters points out, was “short on details on how to curb U.S. energy demand.”

Furthermore, the President’s call for a path towards greener energy and energy independence will not be easy. The New York Timesappropriately states, “The path to that independence — or at least an end to dependence on the Mideast — could well be dirty, expensive and politically explosive.”

President Obama continues to voice his support for alternative fuels and green energy. He argued for energy from wind, solar, natural gas, biofuels, natural gas, and nuclear. However, as I have argued in the past, these alternative fuels have costly subsidies, unintended consequences, are not cost effective, and have proven to be largely inefficient (I address the unintended consequences of ethanol here, here, and here and the unintended consequences with wind turbines here).

The president is calling for more government regulation. He gave a glimpse of a new energy standard he is going to pursue this summer, “This summer, we’re going to propose the first-ever fuel efficiency standards for heavy-duty trucks. And this fall, we’ll announce the next round of fuel standards for cars that build on what we’ve already done” he said. In an economy that is looking to rebound from a recession, businesses do not need another costly government mandate forcing them to change their transportation fleet. Instead, the President should rely on the market. Businesses will upgrade their transportation fleet naturally through the market when it is efficient and more cost effective for them to utilize heavy-duty trucks that are more fuel efficient.

The president also stated that we need to look to other countries, such as Brazil, for oil. However, an article published by Real Clear Markets is very critical of the President’s pursuit of Brazilian oil:

Now, with a seven-year offshore drilling ban in effect off of both coasts, on Alaska’s continental shelf and in much of the Gulf of Mexico – and a de facto moratorium covering the rest – Obama tells the Brazilians:

“We want to help you with the technology and support to develop these oil reserves safely. And when you’re ready to start selling, we want to be one of your best customers.”

Obama wants to develop Brazilian offshore oil to help the Brazilian economy create jobs for Brazilian workers while Americans are left unemployed in the face of skyrocketing energy prices by an administration that despises fossil fuels as a threat to the environment and wants to increase our dependency on foreign oil.

Furthermore President Obama’s talk of expediting drilling permits is not wholly accurate. The Obama Administration has not been friendly to offshore domestic drilling since the BP disaster last year. As the above quoted article from Real Clear Markets explains, there has been a seven-year offshore drilling ban on Alaska’s continental shelf and in much of the Gulf of Mexico. That has not changed under the Obama Administration. The Heritage Foundation pointed out in February:

Putting aside calls from some who want to increase domestic exploration to areas in Alaska and elsewhere, President Obama has completely shut down the existing oil drilling infrastructure in the U.S. At least 103 permits are awaiting review by the Bureau of Ocean Energy Management, Regulation and Enforcement. The federal government has not approved a single new exploratory drilling plan in the Gulf of Mexico since Obama “lifted” his deepwater drilling moratorium in October 2010. Obama also reversed an earlier decision by his administration to open access to coastal waters for exploration, instead placing a seven-year ban on drilling in the Atlantic and Pacific Coasts and Eastern Gulf of Mexico as part of the government’s 2012-2017 Outer Continental Shelf Program.

As expected the president’s energy speech is not receiving much praise from the oil industry. Obama claimed that the oil industry is sitting on leases instead of using these for oil production. Ken Cohen, Exxon Mobile Corp.’s vice president of public and government affairs addressed the President’s claims and reflected on his speech in a Wall Street Journal article:

Said Mr. Cohen: “90% of the words sound relatively right in line with what you’d hear us say,” in terms of enhanced use of natural gas, increasing energy efficiency, more research and development and more domestic production. But the speech didn’t address policies that Mr. Cohen said are hampering oil development, such as opening areas that are off limits to the industry, and insisted on uneconomic mandates for renewable fuel. Moreover, the mention that oil companies are hoarding unexploited leases is off the mark, he said.

“The notion that there’s some economic incentive to sit on a lease is wrong,” Mr. Cohen said, particularly when oil prices are above $100 a barrel.

Despite the recent tragic events of Japan’s nuclear power disaster, it was relieving to see the president not call a halt to nuclear energy. While it will most likely take time for nuclear energy to rebound from the catastrophic events, the president looked at the situation pragmatically by continuing to voice support for nuclear energy while requesting a Nuclear Regulator Commission safety review to make sure all existing nuclear energy facilities are safe.

Despite the criticism, it is still important to keep in mind that we are all stewards of the Earth and need to take care of the planet God has given us. We do not get a replacement and we must see that future generations have a planet they can live in without problems created by our generation. The President’s call to not waste energy should be applauded, and advice we should all heed. However, as the United States continues to define its energy policy it is also equally important to keep in mind we are called to not just be environmental stewards, but also financial stewards. Our energy policy should be for the well-being of the planet but also economically feasible without being burdened with costly subsidies and unintended consequence.